U-verse remains a growth driver in Q4

AT&T reported a net gain of 192,000 U-verse TV subscribers for a total of 4.5 million TV customers, and a net gain of 609,000 high-speed Internet subscribers, to reach a total of 7.7 million.

The company said its combined total of TV and broadband U-verse subscribers was 8 million.

The discrepancy in the totals (4.5 million plus 7.7 million exceeds the figure of 8 million) is due to AT&T wrapping DSL and U-verse broadband numbers together in the 7.7 million.

AT&T reported that growth in U-verse offset losses from DSL, and that “for the first time, the company has more consumer U-verse high-speed Internet subscribers than DSL subscribers.” Overall, the company said its wireline broadband subscribers were flat, but because of the mix of higher-value U-verse customers, broadband ARPU was up more than 10 percent year-over-year.

The company said it would continue building out its U-verse footprint but declined to provide specifics.

When asked about decommissioning copper lines, CFO John Stephens said: “We continue to work that issue not only on a network engineering and our IT guys with regard to products and services and all the issues, really the transitioning to an all-IP service based providers, but we are also working it from an external affairs on the regulatory side. I will tell you from a cost savings perspective that there are no significant cost savings expected in this guidance that we gave for 2013.

“And I would suggest to you that is a – it is a number of years out,” Stephens continued, according to the transcript. “It's not that it will not be achieved, but it’s a number of years out in the sense of – this is a longer process to work with all the interested parties and make sure we do it right, do it effectively and do it successfully. Working it, lot of activity on it, but I wouldn’t suggest to you that there is a significant improvement in cost structure in ’13 because of it.”

By way of comparison, Verizon, which reported its earnings two days ago, added a net 144,000 Internet customers and 134,000 FiOS TV customers, bringing the company to a total of 5.4 million FiOS Internet and 4.7 million FiOS video customers. (With DSL, the company has a total of 8.8 million broadband subscribers.) Verizon pointed out that the number of FiOS additions was higher than in the previous two quarters.

Verizon noted that it has been replacing “high-maintenance portions of its residential copper network” with fiber, as much to reduce maintenance costs as to improve service. For all of 2012, Verizon said it migrated 223,000 homes to fiber, which contributed to an 11 percent improvement in trouble reports across Verizon’s entire copper network for the year. The company said it has a target of 300,000 additional migrations within FiOS markets in 2013.

On the wireless side, the launch of the iPhone 5 helped AT&T attract more new customers in the holiday quarter than it has in three years, but the company posted a big loss because of an annual adjustment to its pension obligations. (Verizon similarly attributed the greatest part of its loss to pension obligations.)

AT&T on Thursday said it added a net 780,000 new phones and other devices on contract-based plans from October to December, its best result in three years. It activated 8.6 million iPhones in the quarter – a record for any company. AT&T was the first company to introduce the iPhone in 2007 and has more iPhone users than any other U.S. carrier.

AT&T's push to expand its market by getting non-phone devices connected to its network also helped, as nearly half of the new contract devices, or 380,000, were tablets.

However, AT&T remained well behind Verizon Wireless, the country's largest cell phone company. It added 2.2 million devices on contract-based plans to its network in the quarter, extending its lead.

Dallas-based AT&T's quarterly loss was $3.86 billion, or 68 cents per share. That compares with a loss of $6.68 billion, or $1.12 per share, a year earlier, also caused by an adjustment to pension and retiree benefit obligations.

AT&T provides benefits to about 360,000 retirees. Two years ago, it started accounting for its retirement benefit obligations with an annual fourth-quarter adjustment. That produces wild swings in fourth-quarter net income that don't relate to the company's underlying business but do illustrate its large obligations to retirees.

Excluding the pension adjustment and some of the cost of repairs from Superstorm Sandy, AT&T earned 44 cents per share, 2 cents short of the average analyst estimate as polled by FactSet.

Revenue was $32.6 billion, up a hair from $32.5 billion a year ago. It slightly exceeded analyst estimates of $32.2 billion.

For the full year, AT&T said it was looking at expanding revenue by more than 2 percent and earnings per share by a "high single-digit percentage." The revenue forecast was slightly higher than analysts expected.

AT&T shares fell 2 cents to $33.73 in extended trading, after the release of the results.

The Wall Street Journal reported last week that AT&T was considering the possible purchase of a European cell phone company to take advantage of depressed prices and perhaps boost results by bringing U.S. business formulas to the continent. On a conference call with analysts, CEO Randall Stephenson neither supported nor ruled out the idea, but suggested that the company is looking at other types of international ventures, like partnerships and roaming agreements. He also noted that the company is licensing its Digital Life home security and automation technology to European carriers.

For all of 2012, AT&T earned $7.3 billion, up 84 percent from $3.9 billion in 2011. Revenue rose 0.6 percent to $127.4 billion.